Proposed Relief for Cancellation of Debt Income
On January 23, Senate Finance Committee Chairman Max Baucus released a markup of the draft “economic stimulus” bill, known as the American Recovery and Reinvestment Act of 2009. A proposal included in that package would permit a taxpayer to defer cancellation of debt income (“COD Income”), making it possible for debtors to repurchase their own debt at a discount without suffering an immediate U.S. federal income tax liability.
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